According to OGJ, Australia had 30.4 trillion cubic feet (Tcf) of proven natural gas reserves as of January 2007. According to the Australian Department of Industry, Tourism and Resources, Australian offshore basins may hold 130 Tcf of undeveloped natural gas reserves. Reserves are located in all of Australia’s states except New South Wales and Tasmania. The most abundant reserves are located offshore of the northwestern coast in the Carnarvon basin, an area more well-known as the Northwest Shelf. Other important basins, including the Cooper/Eromanga basin in Central Australia and the Bass/Gippsland basin, are located offshore Southern Australia. Natural gas production in Australia has increased steadily over the last decade, from 930 billion cubic feet (Bcf) in 1994, to 1,300 Bcf in 2004. In the same time period, consumption has grown as well, from 660 Bcf in 1994 to 931.3 Bcf in 2004. Australia is expected to maintain natural gas self-sufficiency for the ensuing decade at a minimum.

The Australian government has no ownership stake in the domestic natural gas industry. The industry is regulated by the Ministry of Industry, Tourism and Resources (MITR) and the Ministerial Council of Energy (MCE). The Australian government created the MCE in 2001 in order to build policy coordination between the commonwealth and state governments. The MCE functions as the director of natural gas policy. Major domestic and foreign players operating in Australia include Santos, Woodside, Chevron, ConocoPhillips, ExxonMobil, and Shell.

Recent natural gas exploration in Australia has resulted in several important discoveries. In 2005, Woodside and ConocoPhillips made significant offshore discoveries at Pluto-1 and Caldita-1, respectively. Pluto-1 could contain upwards of 4 Tcf of contingent natural gas resources (according to Woodside), while Caldita-1 is estimated to contain 1.5 Tcf of natural gas reserves. In July 2006, Chevron announced a new discovery at its WA-268-P Block, which is located adjacent to the prolific Jansz natural gas field. In August 2006, Apache noted positive showing of natural gas from its Reindeer/Caribou field in Australia’s Carnarvon basin. Apache is studying the possibility of constructing pipeline infrastructure for the field, which the company would like to bring online by 2008. In 2009, ExxonMobil (operator) plans to bring the Kipper field online. Kipper is estimated at having recoverable natural gas reserves up to 620 Bcf, which will be used to supply the Gippsland region in southern Australia over the medium term. Intec Engineering and WorleyParsons will conduct the front-end engineering and design contract on Kipper. Further natural gas discoveries will likely be made inadvertently as a byproduct of Australia’s recent surge in petroleum exploration, as past exploration in the deep waters off Southern Australia has primarily resulted in the discovery of natural gas.

ConocoPhillips and Santos discovered natural gas in the Timor Sea in September 2005. The companies have been in the process of drilling appraisal wells and shooting a 3D seismic survey over the area to determine commerciality of the discoveries. ConocoPhillips is operator of the jointly held NT/P69 license, with partner Santos. Control in the Timor Sea region has been contested during the past few years. However, in March 2003, the Timor Sea Agreement came into force, creating a Joint Development Area (JDA) between East Timor and Australia and setting the division of royalties from hydrocarbon production at 90:10 in favor of East Timor. Only the Bayu Undan natural gas field (3.4 Tcf), which began operation in February 2004, lies wholly within the JDA. Eighty percent of the Greater Sunrise field (9.3 Tcf) is located outside of the JDA. The Timor Sea also contains natural gas in the Evans Shoal, Petrel, and Tern natural gas fields, which are estimated to contain 4 Tcf of natural gas combined.

Natural Gas Projects Currently Under Construction
Project	Location (Basin)	Operator	Reserve Estimate ( Tcf )	Expected Start-up
Gorgon	Western Australia (Carnarvon)	Chevron	40	2010
Browse Gas Project	Western Australia (Browse)	Woodside	20.5	2011
Greater Sunrise	Northern Territory (Bonaparte)	Woodside	8.4	On Hold
Scarborough	Western Australia (Carnarvon)	ExxonMobil	7	Planning Stage
Pluto	Western Australia (Carnarvon)	Woodside	4.1	Planning Stage
Angel	Western Australia (Carnarvon	Woodside	1.8	4Q 2008
Northwest Shelf Train 5	Western Australia (Carnarvon	Woodside	N/A	4Q 2008
Source: Australia Department of Industry, Tourism and Resources , Woodside Petroleum, Exxon Mobil, Global Insight

Over the past decade, Australian LNG exports have increased by 58 percent. In 2005, Australia exported 13.8 million tons of LNG, which made the country the fifth largest exporter of LNG in the world. Japan is the primary destination of Australia’s LNG exports (12.3 million tons in 2005), with smaller shipments to South Korea, Taiwan, and India. In 2002, Australia secured contracts to supply LNG to China, and Australia is also negotiating with the United States regarding possible export of LNG to markets on the US west coast.

The North West Shelf Venture (NWSV), a consortium of six energy companies led by Woodside, operates four offshore LNG trains. It relies on natural gas supplied from North Rankin and nearby fields in the Northwest Shelf (NWS). The majority of LNG produced by the NWSV is exported to Japan, with occasional spot sales to the United States, Spain and Korea. In June 2005, Chevron announced plans for adding a fifth LNG train to NWSV facilities. The fifth train will increase export capacity by 4.2 million tons to a total of 16 million tons per year. The cost of the project is estimated at $1.6 billion, with startup in late 2008. China’s need for LNG imports has also given support to the fifth train’s development.

Although the NWSV dominates Australia’s LNG market, additional LNG projects are also being developed. Chevron (operator), along with Shell and ExxonMobil, are expected to make a final investment decision on how to proceed with the Greater Gorgon Gas project, which contains proven and probable reserves of 40 Tcf. The Gorgon project entails constructing a pipeline to transport natural gas from Gorgon field to Australia’s Barrow Island, where Chevron plans to have a liquefaction plant with an annual capacity of 5.6 million tons per year. In December 2006, Australia’s Environment Minister announced that the Gorgon project could proceed as long as members of the joint venture adhere to strict environmental conditions. The consortium has already pledged $80 million towards a series of environmental initiatives. In addition, there are plans to construct a carbon dioxide sequestration plant for emissions produced by natural gas processing at the LNG facility.

In February 2006, ConocoPhillips unloaded the first LNG from its Darwin plant. Darwin is located on Australia’s northern coast and is supplied with natural gas from the Bayu/Undan field. In March 2002, ConocoPhillips arranged to sell 3 million tons of LNG per year from the Darwin plant to Tokyo Electric Power Company and Tokyo Gas Company for 17 years beginning in 2006. ConocoPhillips operates the project with partners Santos and Eni. Woodside Petroleum is leading another LNG project that is taking place in Browse Basin. The project includes construction of two LNG trains processing natural gas from various fields off Australia’s west coast. The project could come onstream as early as 2011. Woodside, with a 50 percent stake, would be joined by BP, Chevron, Shell and BHP Billiton.

Australia’s pipeline system is designed to carry natural gas from centrally located fields to coastal urban hubs like Sydney and Melbourne. However, due to offshore projects on the rise, a large investment in the country’s pipeline network will be necessary to bring additional natural gas into the grid. Australia estimates that it will require $5.5 billion of new investment over ten years to efficiently use natural gas to generate power. At present, the Australian Pipeline Trust (APT) operates over 4,350 miles of pipelines (oil and gas combined), while Epic Energy operates around 2,485 miles of pipelines (oil and gas combined). Australian Gas Light (AGL) is the leading owner of natural gas pipelines in the country, which APT operates.

In May 2006, APT announced plans to develop a 170-mile natural gas pipeline that will link the offshore Blacktip field to the natural gas plant at Wadeye. In September 2006, owners of the Dampier to Bunbury Pipeline (DBP) received approval to upgrade its pipeline with investments of $534 million. The company will lay new pipe along existing lines, which will increase capacity by around 17 percent. The DBP connects offshore natural gas fields in the NWS to markets in Western Australia. The owners of DBP expect to see capacity increases from the investment by the first quarter of 2008.